DOCUMENT EBSUHE 02855 - [A2093196] Need for Faicer Treatment of Homeowners' Cldims for Defects in Existinq Insured Hones. CED-77-97; B-114860. Jujy 27, 1977. 21 pp. + 2 appendices (5 pp.). Report to the Congress; by Elmer B. Staats, Comptroller General. Issue Area: Domestic Housing and Community Development: Housing for Low and Moderate Income Families (2101); Domestic Housing and rcsmunity Development: Federal Credit Incentives to Stimulate Housing (2104). Contact: Community and Economic Development Div. Budget Function: Community and Regional Development: Community Development (451). Organization Concerned: Department of Housing and Urban Development. Congressional Pelevance: House Committee on Banking, Currency and Hrusing; Senate Committee on banking, Housing and Urban affairs; Congress. Rep. Ralph H. etcalfe. Authority: National Housing Act, as amended, sec. 518(b) (12 U.S.C. 1735b(b) (Supp. V)); S. 4368 (92nd Cong.). National Housing ct, sec. 235 (12 U.S.C. 1715z). National Housing act, sec. 203 (12 U.S.C. 1709). National Housing Act, sec. 221 (12 U,S.C. 17151). Housing and Community Development Act of 1974. Emergency Housing ct of 1975. Housing Authorizatior Act of 1976. Homeowners in Chicago who purchased homes with major defects have been treated unfairly and inconsistently by the Department of Housing and Urban Development (HUD) in their efforts to seek compensation. Ambiguous criteria for evaluating claims and only partial reimbursement were the major deficiencies of the compensation program. Findings and recommendations to rectify the situation are applicable throughout the country. Findings/Conclusions: Better criteria are needed to evaluate the validity of claims. A number of rejected claims are similar to claims considered valid. Homeowners were not always informed of the right to appeal rejected claims. Incorrect partial compensation for valid claims was sometimes granted. Recommendations: HUD should more clea-lv define criteria as to what constitutes a serious defect. Guidance given inspectors to determine whether defects existed at the time of insurance commitment should pount out the inappropriateness of relying (1) solely on a fixed time limit without regard to other factors in each case, or (2) on the original Federal Housing Administraton appraisal. BUD should direct the Chicago area office to discontinue using a fixed time-limit criterion to the exclusion of other factors, resolve serious doubts in favor of the homeowner in evaluating claims, and reevaluate all claims rejected on the basis of inappropriate criteria. Procedures for reimbursement should cover total actual costs, includiny finance charges, and should be implemented in a uniform and consistent anner. (DJf) REPORT TO THE CONGRESS U'% BY THE COMPTRO LLER G(ENET'AL OF TIlE UNITED) STA TES Need For Fairer TreatmenL Of Homeowners' Claims For Defects In Existing Insured Homes Department of Housing and Urban Development While this report is directed at a situation in Chicago where homeowners have been treated unfairly and inconsistently under a De partment of Housing and Urban Development program, a number of GAO's findin-os, con clusions, and recomit,,endations to correct thc situation are applicable throughout the Nation. !n Chicago, homeowners were tceated unfairly and inconsistently under a departmental pro gram to compensate them for major defects affecting the use and livability of existing homes pu ichased with federaliy insured ; or tages. Lack of cleatly defined criteria for evaluatilng the acceptability of homeowner clainls fot as sistane have resulted in inconsistent ciepart mental determinations thaa frequently wvver reversed when homeowners appealed th (id, cisions. Also, Chicago hor,eowners were ,ut fully reimbursed for defects, as prescrii)edl t)y dep-rtmental regulations. CED-77-97 JULY 27, 1977 COMPTROU.ER GENERAL OF THE UNITED STATES WASHINGTON. D.C. 2054 B-114860 To the President of the Senate and the Speaker of the House of Representatives This report discusses the need for fairer treatment of homeowners' claims by the Department of Housing and Urban Development under a program designed to compensate homeowners for defects in existing insured homes. We made our review at the specific request of Congress- man Ralph H. Metcalfe of Illinois, and we testified on it before the Subcommittee on Manpower and Housing, House Commit- tee cn Government Operations, in hearings held on April 15, 1977. Because of the national applicability of many of our findings, conclusions, and recommendations, and because of considerable congressional interest in the program, we de- cided that this report should be issued to the Congress as a wnole. Copies of the report are being sent to the Director, Office of Management and Budget, and the Secretary of Housing and Urban Development. Comptroller General of the United States COMPTROLLER GENERAL'S NEED FOR FAIRER TREATMENT OF REPORT O THE CONGRESS HOMEOWNERS' CLAIMS FOR DEFECTS IN EXISTING INSURED HOMES Department of Housing and Urban Development DIGEST Chicago area homeowners have been treated un- fairly and inconsistently under tho DeDartment of Housing and Urban Development's program to compensate homeowners for major defects affect- ing the use and livability of existing homes. Under section 518(b) of the National Housing Act, as amended (12 U.S.C. 1735b(b)), the Deparcment administers a program to correct or compensate owners of existing homes pur- chased with federally insured mortgages in which there were serious defects at the time of insurance commitment. Although this review was directed primarily toward the administration of the program ill the Chicago area, GAO is making recommenda- tions aimed at bringing about more objective and consistent evaluations, nationwide, of homeowner claims as well as correcting prob- lems in Chicago. Nationwide, the Secretary of Housing and Urban Development should --direct that more clearly defined criteria be developed as to what constitutes a serious defect, -- direct that the guidance provided to in- spectors for determining whether defects existed at the time of insurance commit- ment recognize the inappropriateness of relying (1) solely on a fined time limit without considering other factors of each case, or (2) on the original Federal Hous- ing Administration appraisal, and -- obtain assurance that all departmental field offices are making payments for claims in accordance with established procedures. (See pp. 16 and 20.) The Secretary should direct the Chicago area office to TelA s. Uon rmoval, the report cover de hould e noted hreot. i CED-77-97 -- discontinue using fixed, time-limit crite- rion without considering other pertinent fac- tors and, rather than relying on original Federal Housing Administration appraisals, be fair and objective, and resolve serious doubts in favor of the homeowner in evaluating claims, -- reevaluate all claims it has rejected on the basis of such inappropriate criteria, and -- pay future claims in accordance with estab- lished procedures as well as reevaluate all claims paid to date in terms of these proce- dures. (See pp. 16 and 20.) GAO expresses go opinion on the legality or illegality of the Department's operations in this rport. Litigation by an association that includes ~numerous community groups in Chicago is pending. (See p. 1.) Because criteria governing the program are vague in terms of identifying what constitutes an eligible defect, or how to determine tnat the defect existed at the time of insurance commitment, area office inspectors end re- viewing officials are forced to exercise considerable judgment in interpreting and evaluating claims. As a result, decisions rejecting homeowners' claims have at times been based on inappropriate criteria, and denials of claims have been overturned during the appeals process at about a 45 percent rate. (See pp. 9 and 10.) The high rate of rejected claims which are appealed successfully is attributable to -- the fact that serious structural dete-ts were not defined adequately (see p. 10), -- inappropriate reliance on the Department's appiaisal/inspections made at the time of irsurance commitment (see p. 11), and -- the use of a preset time limit on the emer- gence of defects to the exclusion of other pertinent factors. (See pp. 12 and 13.) ii Not all homeowners have appealed rejected claims. Many of these claims appear similar in circum- stances to those appealed successfully. (See p. 14.) Homeowners also were not being fully eimbursed as prescribed by the Department's regulations. About one-third of the claims checked by GAO had been underpaid because the Chicago area office had reimbursed the homeowners on the basis of average replacement cost rather than actual cost. (See p. 18.) Cost of the program since its inception through January 1977 was about $18.5 million with 22,100 payments having been made, From April 1975 through January 1977 about 76,800 claims were received nationally with 13,900 (or about 18 percent) found valid and acceptable for reimbursement. The Chicago area office received about 13,200 claims from April 1975 through February 1977 and has judged 2,500 (or 19 per- cent) of them to be valid. (See pp. 6 and 7.) AGENCY COMMENTS AND GAO'S EVALUATION The Department agreed with most of GAO's recom- mendations and indicated that actions have been or are being taken in response to them. (See pp. 22 through 25.) The Department disagreed with GAO's recommenda- tion that criteria concerning what constitutes a serious defect should be more clearly defined. The Department said that guidelines should not be too restrictive in order that benefit of any doubt should be given to homeowners. Also, the Department pointed out the difficulty in provid- ing guidance covering every situation. GAO recognizes some of these limitations; however, it points out that the guidelines could have been, and should be, strengthened to reflect the experiences of the earlier years of the program in terms of eligible defects. This would add an element of consistency within and among the Department's field offices as they consider the merits of each claim and would result in fairer treatment of homeowners. (See pp. 16 and 17.) tI Sat iii Con tents LIGEST i CHAPTER 1 DESCRIPTION AND STATUS OF SECTION 518(b) HOMEOWNER ASSISTANCE PROGRAM 1 Background 1 Criteria and procedures used ir. evaluating caims and appeals 3 Section 513(b) program statistics 6 Scope of review 8 2 ACTIONS NEEDED TO INSURE EQUITABLE TREAT- MENT TO HOMEOWNERS SUBMITTING CLAIMS UNDER SECTION 518(b) 9 Appeal statistics 9 Need for better criteria in evaluating the validity of claims 10 Claims not appealed which are similar to claims reconsidered valid 14 Homeowners not always informed of right to appeal 15 Conclusions 15 Recommendations 16 Agency comments and our evaluation 16 3 VALID HOMEOWNER CLAIMS NOT F LLY REIMBURSED 18 Incorrect compensation of Cicago homeowners 18 Conclusions 20 Recommendations 20 Agency comments 20 APPENDIX I Letter dated May 17, 1977, from the Assist- ant Secretary fcr Housing-I"ederal ousing Cummissioner, DepaLtment of Housirg and Urban Development 22 II Principal HD officials responsible for administering activities discussed in this report 26 ABBREVIATIONS FHA Federal Housing Administration HUD Department of Housing and Urban Development CHAPTER 1 DESCRIPTION AND sTATUS OF SECTION 518(b) HOMEOWNER ASSISTANCE PROGRAM In accordance with a March 30, 1976, request of Congressman Ralph H. Metcalfe and subsequent discussions ';th his ofice, we reviewed the activities of the Chicago ctrea oficef of the Department of Housing and Urban Develop- ment (HUD) concerning its operation of section 518(b) of the National Housing Act, as amended [12 U.S.C. 1735bib), (Supp. V, 1975)]. Specifically, we -- obtained statistical data on c program, such as the number of applications received, accepted, modi- fied (accepted in part), or rejecteg; -- identified the criteria used to evaluate the eligibil- ity and validity of program applications, including any local modifications made to the criteria, and -- reviewed samples of rejected applications which have and have not been appealed to contrast HUD's final determinations for each. On March 16, 1976, the MetLopolitan Area Houzing Alliance, an unincorporated association that inrludes num- erous community groups in the Chicago area, filed a class action complaint in the United States District Court for the Northern District of Illinois against the Secretary of HUD and other HUD officials. The complaint challenges the procedures utilized by HUD to implement the section 518(b) homeowner assistance program in Chicago. The plaintiffs maintained that the program's various procedural irregulari- ties are violations of the National Housing Act and due process of law as guaranteed by the Fifth Amendment to the U.S. Constitution. On June 6, 1977, te Government's motion for summary judgment was partially granted with other issues remaining. Tnis report expresses no opinion on the legality or illegality of HUD operations. BACKGROUND Section 518(b) of the National Housing Act--a homeowner assistance program--was enacted on December 31, 1970, to correct or compensate owners of existing homes for structural or oher defects that seriously affect the use and livabilty of any single-family dwelling covered by a mortgage insured under section 235 (12 U.S.C. 1715z) of the same act. Some of the conditions for compensation stated that the defect must 1 have existed on the date of insurance commitment and that it be one which a proper inspection could reasonably disclose. Also, the homeowner must have requested assistance not later than 1 year after the mortgage was insured. The section 518(b) program was modified by the Housing and Community Development Act of 1974 and the Emergency Hous- ing Act of 1975 to -- include two-, three-, and four-family dwellings, in- stead of just single-family dwellings; -- include homes located in older, dlininq urban areas covered by mortgages insured under sections 203 and 221 of the National Housing Act (12 U.S.C. 1709 and 1715X, respectively) between August 1, 1968, and Jan- uary 1, 1973; -- correct only such defects which seriously affect use and livability by creating danger to the life or safety of the inhabitants; and -- extend the deadline for filing applications for assistance under sections 203 and 221 to March 22, 1976. More recently, the Housing Authorization Act of 1976 extended the deadline for filing section 518(b) claims under sections 203 and 221 to December 3, 1976. It also established a section 518(d) which provides coverage similar to that cited in section 518(b) to homeowners with mortgages insured sections 203 and 221 on or after January 1, 1973, under but prior to August 3, 1976. The homeowner ust request assistance under section 518(d) by August 3, 1977. The mortgage insurance sections of the National Housing Act affected by section 518(b) and 518(d) programs are sum- marized below. -- Section 203 provides mortgage insurance to help home- buyers purchase new or existing one- to four-family dwellings. It is the basic and most commonly used program. Any individual can participate in the pro- gram if he or sh- has a good credit record and can demonstrate an ability to make required investment and mortgage payments. -- Section 221 provides mortgage insurance for the ur- chase of homes by families displaced by Government action and by families with low- or moderate-ircomes. While there are no specific income requirements for eligibility, low mortgage limits available under this program tend to restrict its use to families with lower incomes. --Section 235 helps lower income families become home- owners b providing mortgage insurance and subsidizing portions cf the monthly payments due under the mort- gages. o be eligible for assistance, the family must have an adjusted income not exceeding 95 percent of the median income of the area. Responsibility for processing, evaluating, and resolving section 518(b) claims was delegated to HUD field offices. Procedures or processing the claims were included in a handbook which, among other things, provided for establishing the (1) eligibility of a claim based on statutory require- ments, and (2) alidity of a claim based on inspection re- sults or other applicable criteria. The handbook was most recently revised .n September 1976. CRITERIA AND PROCCDURES USED IN EVALUATIG CLAIMS PND APPEALS A honeowner's claim under the section 518(b) program is screened first for eligibility and then for validity after its submission to UD. If the claim is rejected for either eligibility or validity, the homeowner has the right to ap- peal the decision and ask for a reconsideration. The criteria and ,rocedures o be used in. making these various determina- tions were established by HUD headquarters for use by its field offices. Wt found no evidence of ne Chicago area office altering or odifying the eligibility criteria. Weak- ne ses found in the criteria used in making validity deter- minations will he iscLssed in cnapter 2. Claim liqibility A nomeowner's claiin for assistance under the sec- tion 518(b) program is initially screened for eligibility to determine if it meets the following statutory require- ments: -- Tne home must be a one- to four-family dwelling. --The home must be more than 1-year old on the date of the issuance of the insurance commitment. -- For a section 235 home, the owner must have requested assistance not later than 1 year after the mortgage was insured or by December 31, 1971, if the mortgage was issued before December 31, 1970. 3 --A section 203 or 221 home must be in an older, declin- ing rban area; the mortgage must have been insured on or after August 1, 1968, but prior to January 1, 1973; and the homeowner must have applied for assistance on or before December 3, 976. Section 518(d) extended the period of coverage for homes with mortgages insured under sections 203 and 221 from Janu- ary 1, 1973, to August 3, 1976. These homeowners must request ass:istance under section 518(d) by August 3, 1977. Of the eligibility criteria, the criterion that the home be located in an older, declining urban area is the only one involving any degree of subjectivity. In implement- ing the statutory provision governing this matter, HUD head- quarters determined that an older, declining urban area was a community with a population of 2,500 or more (the definition of urban) in which at least 50 percent of census the dwellings w re built before 1940. HUD instructions provid? that when the census tract data indicates an ineliqible location, the claimn must be field inspected to determine the accuracy of the data. Chicago area office personnel visited areas presumed to be ineligible by the census tract data and identified those areas within the tract that actually could be classified as older and declining. The area office maintained a map of ithese eligible areas within the ineligible census tracts. As shown in the table on the bottom of page 7, the Cnicago area office rejected 3,920 claims, or about 30 per- cent of the claims it hd processed, on the basis that they were ineligible. We examined 100 ineligible claims and found the following reasons were given for the rejections: Reason for rejection Number Property not located in older, declining urban area 59 Property not insure9 by HUD within statutory timeframes 34 Claim n.ot submitted within statutory time- frames 8 Property not insured by HD 1 T tal a/102 a/Two of the claims were rejected rtr two rasons each. 4 t ..e fact that properties were not located in older, declining urban areas was primarily why claims were determined to be in- eligible. While this criterion is more subjective than the others, we found nothing to suggest that the Chicago area office had altered or modified it. The same holds true with regard to other eligibility criteria. Claim validity After a claim is determined to be eligible, it is as- signed to a field inspector who inspects the defect or exam- ines documentation and other evidence showing correction of a defect, and renders a judgment as to the validity of the claim. The inspector evaluates the claim according to the following HUD validity requirements. -- The defect must be a structural or major defect which so seriously affects use and livability as to create a serious danger to the inhabitants' lives or safet. -- The defect must have existed on the date the insurance commitment was issued and be one that could be rea- sonably disclosed by a proper inspection. HUD guidance on what constitutes a structural or major defect lists the following as being eligible for assistance: (1) worn-out roofs, (2) seriously defective heating systems, and (3) rotten porches and steps. To determine the types of defects for which homeowners were seeking assistance, we reviewed all April 1975 applications determined to be in- velid by the Chicago area office and not appealed by the homeowners. Of the 256 applications reviewed, approximately 90 percent fell within the above three categories--roofs, heating systems, and porches and steps. HUD guidance concerning whether the defect existed at the time of insurance commitment listed t judgment of the field office as the criterion for determining the exist- ence of the defect when no repair requirements were shown on the conditional commitment for insurance. The guidance stated that the test for determining whether a proper in- spection should have disclosed the defect was whether the appraiser, operating in accordance with the applicable in- structions at the time of the appraisal/inspection, should have observed the defect or anticipated it due to observ- able conditions. Statistics presented in the table on the bottom of page 7 show that the Chicago area office rejected 6,611 claims, or about 51 percent of the claims it has processed, on the basis that they were invalid. 5 Appeal process Homeowners have the right to appeal rejected sec- tion 518(b) claims. If a homeowner chooses to do so, his or her claim is appealed to the area office where it is then assigned to an inspector. The inspector is to reevalu- ate the claim and r :ommend to an area office reconsidera- tion committee whether to accept or reject it again. Final decision within the area office regarding the appeal rests with the reconsideration committee. If a decision is reached in the area office to over- turn the initial rejection and thus accept the claim for reimbursement, then the appeal goes no further and is handled by the area office. If, on the other hand, the area office continues to consider the claim either wholly or partially invalid, it is then forwarded to the regional additional consideration. office for Until July 1976 the regional office reviewed the forwarded claim ad either reversed the area office's determination or sent its negative recommendation to HUD headquarters, which then made a final decision on the case. HUD headquarters originally wanted final review au- thority to insure giving homeowners the maximum benefit. However, b July 16, 1976, there were not many headquarters reversals of area or regionai office decisions, and suffi- cient staff was not vailable for reviewing cases. ters, therefore, delegated the final Headquar- decision on appeals to the regional offices. SECTION 518(b) PROGRAM STATISTICS Although the program has been in effect since late 1970, nationwide statistics developed by HUD headquarters are lim- ited to program activities that have occurred since about April 1975. It was at this time that the program was sub- stantially expanded as a result of revisions to the National Housing Act in 1974, which authorized acceptance of home- owners' claims for defects in properties insured under sections 203 and 221. HUD's section 518(b) activ:.ty status report, as of January 27, 1977, showed that, nationwide, about 86,500 claims and requests for reconsideration were received from about April 1975 to January 27, 1977. As shown in the following table, HUD's Chicago regional office received 39,396 (or about 46 percent) of these claims tions. and reconsidera- 6 Reconsid- Claims eration eligible Claims Claims requests HUD claims determiations and in awaiting E!o [e!enived received !rocess T Total In InIIble erScesSin Boston 3,012 582 3,594 972 1,600 34 38i 5 New York 10,080 2,013 12,093 1,348 7,679 2,945 268 80 Philadelphia 9,715 1,247 10,962 1,278 6,504 2,379 451 20 Atlanta 4,104 363 4,467 289 1,071 3,186 29 22 Chicago 35,253 4,143 39,396 ,,837 18,285 t3,998 2,109 108 Dallas 3,347 206 3,553 269 903 2,798 27 25 Kansas City 3,187 647 3,834 905 1,450 1,259 108 Denver 817 47 864 147 381 382 2 5 San Prancisco 5,562 - 191 5,753 458 1,029 4,656 50 13 Seattle _11746 211 1,957 396 917 569 71 33 Total (note a) 76 823 I 20 86 473 13899 9l824 32,521 3 513 a/There is a difference of 3,586 claims between the total claims and reconsiderations received by UD, and the total claims determined, in process, or awaiting orocessing 4 by HUD. The difference is irreconcilable. A HUD official stated that it i at ri- butable to periodic inventory adjustments to certain, but not ll, of the pro-essing statistics. The following table shows the status of claims received by the Chicago area office from about April 1975 through February 17, 1977. The Chicago area office is one of several area or insuring offices within the Chicago region. It should be noted from the table that only 18.9 percent of the claims received by the Chicago area office have passed eli- gibility and validity tests and have been accepted for reim- bursement. This statistic, however, is comparable to the 18.1 percent of claims received nationwide (76,823) which were determined to be valid (13,899). Status of claims Number Percent Valid (acceptable for reimbursement) 2,508 18.9 Invalid 6,611 49.9 Ineligible 3,920 29.6 Eligible and in process 177 1.4 Awaiting processing 29 .2 Total 13,245 100.0 From April 1975 through January 1977, HUD made 12,173 section 518(b) payments to homeowners amounting to about $10.9 mllion. In some cases, two or more payments may re- late to one claim. Total cost of the program since its inception in 1970 through January 1977 was about $18.5 mil- lion with 22,124 payments having been made. A breakdown of program payments by HUD reqional or area offices was not available. Also, requested statistics on the number of claims modified (accepted in part) were not available at either the Chicago area office or HUD headquarters. A Chicago area 7 office official did advise us, however, that most claims determined to be valid were only done so partially. SCOPE OF REVIEW Our review was conducted t HUD headquarters in Washing- ton, D.C., and its regional and area offices n Chicago, Illinois. Section 518(b) statistical data was obtained on a national basis as well as for the two Chicago offices. We studied legislation incidental to the program and obti-ined the criteria and procedures HUD uses to carry cut the pro- gram. To test these criteria and procedures, several samples of homeowner claims were selected for detailed review. Al- though not specifically requested to do so, we also reviewed the accuracy of section 518(b) homeowner reimbursements. CHAPTER 2 ACTIONS NEEDED TO INSURE EQUITABLE TREATMENT TO HOMEOWNERS SUBMITTING CLAIMS UNDER SECTION 518(b' Homeowners in the Chicago area who appeal their rejected section 518(b) claims stand a good chance of having the rejections overturned. Of the homeowners who have done so and whose appeals have been processed, about 45 percent have had their claims either wholly or partially approved. A look at why so many rejected claims were subsequently found to be valid disclosed that (1) the criteria used in evaluat- ing claims have been weak and not very definitive and (2) the Chicago area office applied timeframe criteria deemed inappropriate by HUD headquarters or relied on !~he original Federal Housing Administration (FHA) appraisals in cont a- vention of its own written instructions. Not all homeowners in the Chicago area whose claims were rejected have appealed, even though some of these claims appear very similar in circumstances to those which have been appealed and later determined to be valid. APPEAL STATISTICS Ot +tie 13,245 claims received by the Chicago area office from April 1975 through ebruary 17, 1977, 6,611 of them were determine to be invalid. Of this number 1,677, or about 25 percent, had been resubmitte' as of February 17, 1977, to the area office in the form of an appeal. Of the 1,411 that have been processed, 637, or 45 percent, were de- termined to be wholly or partially valid s shown in the following table. Appeal status Number Percent Valid 84 5.0 Partially valid 553 33.0 Invalid 774 46.1 Awaiting processing 266 15.9 Total 1,677 100.0 9 NEED FOR BETTER CRITERIA IN EVALUATING THE VALfI-TY--F CLAIMS Our review indicated that the large number of successful appeals is occurring because the criteria used in evaluating claims are vaguie in terms of defining (1) what constitutes an eligible defect or (2) how an inspector is to assure himself that the defect existed at the time of insurance commitment. We reviewed 47 claims appealed to the Chicago area of- fice that have been determined to be either wholly or'par- tially valid and for which reimbursement vouchers had been prepared at the time of our review. Thirty-eight f these claims were determined valid by the area office. (Those determined to be partially valid also received regional and headquarters concurrence). Seven of the appeale] claims were found to be invalid by the area office, but were over- turned and declared valid at the regional and/or hedquar- ters level. The remaining two claims had been appealed only because the homeowners disagreed with the amount HUD had agreed to reimburse them. Both cf these claims were resolved by the area office in favor of the homeowners. Our review of the 47 claims and the determinations the Chicago area office made disclosed, in part, that (1) struc- tural cfects have not been adequately defined, (2) there has been too much reliance placed on original FHA appraisals, and (3) claims were being both rejected and accepted primar- ily on the basis of fixed, time-limit criteria with appar- ently little consideration being given to the other factors -f each cse. Each of these situations is discussed below. Structural defects not aadequateTy dNTined- The section 518(b) inspector is required to evaluate whether the claimed defect is a structural or major defect which creates a serious danger to the inhabitants' lives or safety. HUD guidance, however, was not specific as to what constitutes a serious defect. For example, descriptions of items listed in the HUD instructions as eligible for assistance were limted to: "worn-out" for roofs, "seriously defective" for heating sstems, and "rottun" for porches and steps. From this guidance the inspector was to etermine the acceptability of the claimed item as a structural or major defect. From our sample of reconsidered claims, we found- many instances where claims were rejectcd by inspectors be.- cause, in their judgment, the defects were not structural or otherwise serious enough to endanger the inhabitants' lives 10 or safety but were subsequently determined to te valid during the appeal process. The two following examples illustrate the subjectivity of he decisions which were reached. -- A homeowner submitted a claim fo- replacing the boiler in his home. The section 518(b) inspector rejected the claim on the basis that a boiler is not a struc- tural item. The homeowner appealed and the home was reinspected. The second inspector recommended that the homeowner be reimbursed because the boiler waL not operational during the first heating season, and a contractor certified that the original bniler was beyond repair. The area office reconsideration com- mittee concurred with the inspector's recommendation and the homeowner was reimbursed $1,495. -- A homeowner requested that repairs be made to the front porch of his home. The inspector determined that the repairs were eligible but was overruled by an area office reviewer who considered the repairs as a part of normal homeowner maintenance instead of being caused by a structural defect. The homeowner appealed. The home was not reinspected, and the area office reconsideration committee determined from the documentation in the file that the needed repairs were ineligible. From the same documentation, HUD headquarters determined that the item was eligible. Estimated cost to repair the porch was $200. Inapropriate reliance on orTijja FFHA appraisals Before a mortgage is insured under sections 203, 221, or 235 of the National Housing Act, an FHA appraisal/ inspection is made to estimate the value of the property and the feasibility of insuring the loan. Another purpose of the appraisal is to determine if epairs, alterations, or additions to the property are necessary to insure pro- tection of the Government's interest in the transaction. Regarding the FHA appraisal/inspection, a 1970 report by the Senate Committee on Bank'ng and Currency, which accompanied Senate bill 4368 (the section 518(b) legisla- tion), tated that: "Information received by the Committee indicates that some FHA appraisers have allowed blatantly defective homes to be sold to lower income fam- ilies under the 235 program. * * * The Committee feels that HUD should bear the burden of correct- ing these defects or compensating the owner for 11 them where HUD employees or agents have made an inadequate appraisal and inspection." In line with the above statement, Chicago area ffice guidance to its section 518(b) inspectors directed them not to attempt to defend the original FHA appraisal but to be fair and objective, and resolve serious doubts in favor of the homeowners. Nevertheless, 10 of the 47 reconsidered claims we looked at were rejected on the basis that the original appraisal/ inspection had not disclosed the defect. .For 6 of the 10 claims, area office reviewers had rejected the claims on this basis even though inspectors had earlier determined that the claims should be declared valid. The following are examples of claims rejected on the basis of FHA appraisal reports which did not indicate the existence of the defect at te time of the commitment for mortgage insurance. --A homeowner replaced the heating system in his home about 1 year after moving in. The inspector, after reviewing the homeowner's application for assist- ance, determined that it was eligible and valid and that it should be paid. An area office reviewer, however, rejected the claim because the original FHA appraisal report indicated that the heating system was acceptable. The homeowner appealed and the home was reinspected. The inspector recommended that-the claimed defect be found eliglible, and the area office reconsideration committee concurred with the inspec- tor's recommendation. The mount approved fo- pay- ment to the homeowner was $1,118. --A homeowner had to repair the furnace in his home during the first year of occupancy and then replaced it about 1 year from the purchase date. The inspec- tor determined that the furnace replacement was in- eligible for reimbursement because it was working at the time of appraisal, according to the FHA appraisal report. The homeowner appealed the claim, and al- though the home was not reinspected, the area office reconsideration committee found the homeowner's claim eligible for reimbursement of $968 based on informa- tion in the claim file. Inappropriate reliance on time-limit-criTeria The Chicago area office adopted time-limit criteria against which the emergence or correction of a defect has 12 been applied in determining a claim's validity. Further, many of the claims we reviewed indicated that this criteria was applied without apparent consideration being given to other factors of each case. At first, a 1-year limit from the date of commitment for mortgage insurance was used; later, a 2-year limit was adopted. To illustrate, in the initial months following the 1974 changes to the section 18(b) program, the Chicago area office was judging, as valid, claims for reimbursement re- lating to heating systems lasting only 1 year. Later, the criterion employed by the area office changed from 1 to 2 years because, according to an area office officia', appealed claims involving heating systems replaced within 2 years were being declared valid at the regional and headquarters level. The area office subsequently adopted the 2-year cri- terion. We were advised by an area office official that a similar situation existed regarding defective roofs. We were also advised that once the heating system criterion had changed, no attempt was made to review all claims previously rejected under the more stringent criterion. One effect of changing the time-limit criterion has been the treating of homeowners' claims inconsistently over the life of the pogram. Many claims rejected in the early stages of the program are similar in circumstance to claims accepted for compensaticn in the more recent s ages after the criterion changed. Also, many homeowners who have appealed their claims rejected on the bsis o the 1-year criterion have had their claims reconsiJered valid using the newer criterion. Those who have not appealed their rejected claims will not be compensated. An official at HUD headquarters told us that it is inappropriate to apply a steadfast time-limit criterion to all claims because each claim should be considered individ- ually and upon its own merit. A number of claims we looked at appear to have been initially rejected and then accepted on the basis of estab- lished time limits with little regard being given to any other circumstances of each case. In each case, the claim was originally rejected because he defect was corrected by the homeowner more than 1 year after the commitment for mortgage insurance, but was later determined to be valid after the area office criterion changed to 2 years. The following are a couple of examp.es. -- A homeowner submitted a claim for replacing the roof on his home. An inspector found the claim invalid 13 because the roof was replaced 2 years after the homeowner moved in. The homeowner appealed, and the claim was determined to e valid by the area office reconsideration committee because the roof was re- placed about 2 years after the homeowner moved in. The homeowner was reimbursed $735. -- Two homeowners submitted claims for the cost of re- placing heating systems about 18 months after pur- chasing their homes. Inspectors found both claims invalid, and the homeowners appealed. The homes were reinspected during the appeal process, and the inspec- tors recommended that the claims be found valid. The area office reconsideration committee concurred with their recommendations because the repairs were made within 2 years of the commitment 'r mortgage insur- ance. The homeowners were reimbu. ed $1,300 and $1,121. CLAIMS NOT APPEALED WHICH ARE SIMILAR TO CLAIMS RECONSIDERED VALID Our review disclosed rejected claims which have not been appealed and in which the circumstances appear very similar to those surrounding many of the claims appealed and determined to be valid. We reviewed 25 such claims from our April 1975 sample. Twelve of the 25 appeared to have been rejected for the same types of reasons as the 47 discussed previously. For example: -- A homeowner was notified that his claim for replacing the furnace in his home was ineligible for compensa- tion because the furnace was acceptable at the time of the original appraisal. His claim was rejected even though it had been replaced within 1 year of the purchase date of the home, and the inspector had de- termined that the furnace was eligible. An area office reviewer rejected the claim on the basis that the furnace lasted 2 zcating seasons--from December 3, 1968, to October 15, 1969. -- A homeowner was notified that his claim for replacing the heating system .. his house was not eligible be- cause it was acceptable at the time of the original appraisal. The inspector rejected the claim because the heating system lasted 1 heating season. -- A homeowner was notified that his claim for replacing the roof on his home was not eligible for reimburse- ment because the roof was acceptable at the time of 14 the original appraisal. The nspector rejected the claim because he considered the roof replacement as deferred maintenance. The roof was replaced less than 1 year after purchase of the home. HOMEOWNERS NOT ALWAYS INFORMED OF RIGHT TO APPEAL while homeowners have always had the right to appeal their disapproved claims, they have not always been informed of this right. In August 1975 an appeal clause that had been part of the Chicago area office's disapproval letter was deleted as a result of the development by HUD headquar- ters of a common acceptance/rejection letter designed to reduce the number of forms required in claims processing. The clause was reinstated by Chicago in April 1976. During the 8 months in which the appeals clause was absent, the Chicago area office made no attempt to advise nomeowners whose claims were disapproved of their right to appeal. Area office officials were of the opinion, however, that Chicago community organizations had adequately publi- cized the right to appeal rejected sec'ion 518(b) claims. They also believed that the 8-month deletion of the clause from the form letter had no effect on the number of appeals received by their office. CONCLUSIONS Homeowners in the Chicago area who have submitted sec- tion 518(b) claims have not been cor.sistently treated in a fair and equitable manner. Because the criteria used are vague in terms of identifying what constitutes an eligible defect or how to determine that the defect existed at the time of insurance commitment, officials of the Chicago area office have been forced to exercise considerable judgment in evaluating claims. As a result many of the claims initially rejected have been reevaluated during the appeal process and subsequently approved--not because there now exists a better set of cri- teria with which to make such decisions, but because the decisions are still very subjective ones, and there now appears to be a more liberalized acceptance by the Chicago area office of section 518(b) claims. This is evidenced by the successful appeal rate of 45 percent and is illus- trated by many of the examples in this chapter. The lengthened time-limit criterion used by the Chicago area office also supports this contention. Those homeowners who have appealed their rejected claims in the Chicago area have been quite successful, and 15 a question arises as to whether other homeowners who have not appealed may not have equally valid claims. Many of the rejected claims which have not been appealed appear very similar in circumstance to those successfully appealed. RECOMMENDATIONS To bring about more objective and consistent evaluation of a homeowner's claim for assistance under the section 518(b) program nationwide, the Secretary of HUD should direct --the development of more clearly defined criteria as to what constitutes a serious defect, and -- that the guidance provided to inspectors for deter- mining whether defects existed at the time of insur- ance commitment recognize the inappropriateness of relaying (1) solely on a fixed time limit without giving due regard to the ther factors of each case or (2) on the original FHA appraisal. In Chicago we rconmend that the Secretary direct the area office to -- discontinue using a fixed, time-limit criterion to the exclusion of other pertinent factors and, rather than relying on original FHA appraisals, be fair and objective, and resolve serious doubts in favor of the homeowner in evaluating claims, and -- reevalute all claims it has rejected on the basis of such inappropriate criteria. AGENCY COMMENTS AND OUR EVALUATION In its letter of May 17, 1977, (see app. I) HUD dis- agreed that more clearly defined criteria as to what consti- tutes a serious defect need to be developed. HUD stated that the decision to give the benefit of any doubt to the homeowner required guidelines that were not too restrictive. It stated that claims determinations can only be made on a case-by-case basis and are strictly judgmental. HUD argued that its guidance cannot reasonably be revised to include all the varying situations that may have occurred and that it is not practicable nor desirable to put such limitations on the program. We agree with HUD's statements that the program's guidance should not be too restrictive nor contain too many limitations. We do believe, however, that the guidance could have been, and should be, strengthened to reflect the actual experiences of the program in terms of what is an eligible 16 defect. This would help to reduce the number of incidences disclosed by our review where claimed defects, through sub- jective judgments, were being rejected initially because they were not felt to be structural or otherwise serious, but were later being accepted during the appeal process. It Would add some objectivity to the determination process as as an element of consistency (which has otherwise been ing) within and among field offices as they consider t.., merits of each claim. Regarding our recommendation that the guidance provided to inspectors recognize the inappropriateness of relying solely on a fixed time limit with little reqard being given to anything else or on original FHA appraisals, HUD officials informally advised us on June 13, 1977, that such guidance is being drafted and will be provided to all HUD field offices. HUD stated in its written comments that (1) the deter- mination as to whether a defect existed at the time of in- surance commitment is often a judgment factor and (2) it is extremely difficult to describe how this determination should be made. HUD said that a time criterion is helpful i- giving the homeowner every benefit of the doubt if it can't positively be determined that the defect existed at the time of commitment. HUD indicated that the time factor is something it considers completely flexible and which must be used in conjunction with all circumstances of each case. Regarding our recommendation that the Chicago area office should be directed to discontinue using a fixed, time-limit criterion to the exclusion of other factors and relying on original FHA appraisals in evaluating claims, HUD stated that since there never was a preset time criterion, the Chicago area office will be instructed to cease using one. HUD also stated that (1) the use of the original appraisal to substantiate the fact that a defect did not exist at the time of insurance commitment is unacceptable and (2) the practice was noticed at the time its staff was reviewing appeal cases. HUD said that many cases were returned so that this could be rectified. HUD agreed to instruct the Chicago area office to re- examine all claims which were found invalid because of the inappropriate use of a time criterion or use of the original appraisal. 17 CHAPTER 3 VALID HOMEOWNER CLAIMS NOT FULLY REIMBURSED Homeowner claims in the Chicago area are not being fully reimbursed under the section 518(b) program because, contrary to HUD procedures, average replacement costs from a "cost data book" are being used by the area office determine such reimbursements. HUD guidelines state to tnat the homeowner should be reimbursed for the actual costs in- curred. Of 54 claims we reviewed which had been processed for payment, 21, or 39 percent, were found not to have been reimbursed in accordance with existing guidelines. INCORRECT COMPENSATION OF-CAGO Ho-iW'NERS Once a claim has been determined alid, section 518(b) procedures state that: "The homeowner will be reimbursed for all costs actually paid and found to be reimbursable not- withstanding the fact that the work could have been done at a lower cost." The procedures also state that where the homeowner's claim is in excess of any reasonable amount proper for the work performed, the claim will be forwarded to HUD headquarters, together with the facts of the case, for determination. In addition, the procedures also specify that financing charges (including interest incurred by the homeowner in correcting an el- e defect) are a reimbursable cost under the pro- gram. To test the HUD Chicago area office's implementation of tne procedures, we reviewed 54 of the approximately 1,200 .ims processed for payment as of July 1976. The 54 claims selected for review included (1) all 31 which, to that point in time, had been reconsidered valid and for which a voucher had been prepared, and (2) an additional claims, which were randomly selected from those i itially 23 determined valid. The area off'ce incorrectly determined the reimbursabil amount for 21 of the 54 claims as shown below. Tyee_of error Number Total amount Average Underpayment 18 $5,278 Overpayment $293 3 75 25 18 The overpayments were due to clerical errors made in computing the reimbursa.ble amounts. The underpayments occurred because HUD area office personnel did not: -- Reimburse the actual costs incurred. The area office director provided written instructions to his person- nel to use a cost data book to calculate the reimburs- able amount for a given claim. The cost data book is furnished to members of the area office's underwriting staff for estimating replacement costs for building improvements when processing applications for mortgage insurance. The book lists the average price for re- placing or repairing an item in the Chicago area. Beeause the book lists the average price, the actual cost incurred by the homeowner may be over or under that amount. The area office, however, considered this a reasonable method for determining reimbursable amounts. We were also advised by area v2fice offi- cials that claims for which full reimbursement had not been made were not forwarded to HUD headquarters as prescribed in the regulations because they believed the area office had authority to make the final deci- sions. -- Fully reimburse homeowners for finance charges for claims processed for payment after August 1975. Ini- tially, HUD p..cedures did not allow homeowners to be reimbursed for ny finance charges they incurred in correcting covered defects. In August 1975, however, HUD headquarters directed the Chicago area office to begin reimbursing finance charges. The following two examples illustrate underpayments re- sulting from the Chicago area office's failure to follow prescribed procedures. -- One homeowner incurred a cost of $994 in replacing the heating system in his home ($915 for che heating unit plus $79 in finance charges). From the cost data book, the area office determined the reimburs- able amount to be $609 including finance charges. The homeowner was reimbursed this amount, which is $385 less than the cost actually incurred. -- Another homeowner incurred a cost of $1,301 to re- place the heating system in his home. Of the total amount, $1,020 was for the heating unit, and $281 was for finance charges. Again, using the cost data book, the area office determined the reimbursable amount to be $852, which is $449 less than the correct amount. The homeowner was reimbursed $852. 19 In July 1976 we orought the 18 underpayments disclosed by our review to the attention of Chicago area office offi- cials. They acknowledged that underpayments had occurred and agreed to further reimburse all the claimants except one who had been underpaid only by an insignificant amount ($9.57). As of June 24, 1977, 12 of the homeowners had beer paid the additional amounts, and vouchers for payment had been prepared for the remaining 5. In July 1976 Chicago area office officials said that, as a result of our review, they are forwarding claims to HUD headquarters when the amount of reimbursement is in question. They also indicated a willingness to review the accuracy of all claims processed by their office to date, provided that sufficient staff is made available for this purpose by HUn headquarters. CONCLUSIONS The Chicago area office has not always scribed procedures in reimbursing homeowners followed pre- for costs in- curred in correcting covered section 518(b) defects. stantial percentage of claims exist where total actual A sub- costs (including finance charges) incurred by homeowners have not been reimbursed. Further, until recently, the area office had not forwarded claims to HUD headquarters for determina- tion where there was some question as to the reasonableness of the costs incurred by the homeowner. If HUD beliedes that its current procedures authorizing reimbursement on the basis of costs actually incurred is tie most appropriate approach, such procedures should be imple- mented in a uniform and consistent manner by the Chicago area office. RECOMMENDATIONS The Secretary of HUD should direct the Chicago area office to pay all future section 518(b) claims in accordance with established procedures and reevaluate all claims paid to date in terms of such procedures. Also, because of our findings in Chicago, the Secretary should assure herself that other HUD field offices are making 518(b) paymerts in accord- ance with established procedures. AGENCY COMMENTS In its comments on this teport, HUD agreed that pre- scribed procedures for fully reimbursing homeowners always been followed. had not HUD concurred that the Chicago area orfice should be directed to pay all future claims in 2U accordance with established procedures and that all claims previously paid should be reevaluated to assure that the reimbursement was an equitable one. Although HUD expects such a reevaluation to take a substantial length of time to complete with the present staff, it said that supplemental vouchers will be issued to any homeowners who were previ- ously reimbursed less than the amount they actually paid. HUD also stated that a notice will be prepared relative to the problem of section 518(b) reimbursements and that it will be distributed to all field offices. 21 APPENDIX I APPENDIX I i.* tDEPARTMENT * 5 OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D.C. 23410 May 17, 1977 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER IN REPLY RIIEFE TOI Mr. Henry Eschwege Director, Community and Economic Development Division United States General Accounting Office Washington, . C. 20548 Dear Mr. Eschwege: Your letter of February 11, 1977, addressed to the Secretary of Housing and Urban Development transmitting a proposed report to the Congress entitled: "The Need to More Fairly Treat Homeowner Claims for Defects in Existing Insured Homes," has been referred to me for reply. I will answer the recommendations in the order that they were presented. Recommendation No. 1: To insure a more objective and consistent evaluation of a homeowner's claim for assistance under the Section 518(b) Program, the Secretary of HUD should direct the development of more clearly defined criteria as to what constitutes a serious defect. (See GAO note, p. 25.] Rep ly: The statute is very specific and restrictive and, consequently, implementing instructions were very difficult to develop. The pros and cons of the specificity of the guidelines were discussed at great length, and on many occasions, during the development of the operating instructions. The decision to give the benefit of any doubt to the homeowner required guidelines that were not too restrictive. For example, a defect of a rotted porch raises the question to what degree was the porch rotted at the time of the appraisal so as to create a threat to the life or safety of the occupant. 22 APPENDIX I APPENDIX I A porch in such a condition, if the house were appraised in 1968 or 1969, would not have still been in existence in 1975 when the 518(b) nspection may hve been performed. Similarly in the case of a worn-out roof, If the roof were in such a condition in 1968, when finally Inspected in 1975 there would have been nothing left to inspect. Therefore, it seems clear to us that such determira- tions can only be made on a case-by-case basis and are strictly judgmental. The guidance in the Handbook offered as examples of what may be considered eligible defects, !f all other criteria are met, cannot reasonably be revised to include all the varying situations that may have occurred. It is not practicable nor desi:ible to put such limitations on the program. The determination as to whether the defect existed at the time of commitment is often a udgment factor. It s extremely diffi- cult to describe how this determination should be made. A time criterion is helpful in giving the homeowner every benefit of the doubt, if the appraiser cannot positively verify that the defect existed at the time of the commitment. The time factor is something that we consider completely flexible. For example, in the case of a claim, for a defective furnace replaced three years after the appraisal, the homeowner may state the furnace was inoperable most of the time and provide repair bills, or other evidence, to document this fact. The homeowner also may state that due to the lack of funds and the inability to obtain a loan It was necessary to "make do" until such time as he could afford to replace the furnace. To deny such a claim, even though it was three years after the appraisal when the furnace was actually replaced, woulo be unfair and would not give the benefit of doubt to the homeowner. Recommendation No. 2: The Secretary should direct the Chicago Area Office to --discontinue the use of inappropriate criteria currently being used in evaluating claims such as (1) the use of a time limitation and (2) reliance on original FHA appraisals, and --consider the need to reevaluate all claims rejected on the basis of such inappropriate criteria. 23 APPENDIX I APPENDIX I Reply: We addressed the use of a time limitation in the response to the first recommendation. Since there was never a preset time criterion, we will instruct the office to cease using one. The use of the original appraisal to substantiate the fact that the defect was not apparent at that time is unacceptable. This practice was noticed at the time that our staff was reviewing the appeal cases. Many cases were returned so that this could be rectified. We agree that the most equitable solution would be to reevalu- ate all the claims rejected on this basis. Accor,'ingly, we will instruct the Chicago Area Office to reexamine all claims which were found invalid because of an arbitrary time criterion or use of the original appraisal. Recommendatlon No. 3: The Secretary of HUD should direct the Chicago Area Office to ,ay ail future Section 518(j) claims in accordance with established procedures 3nd reevaluate all claims paid to date in terms of such procedures. Also, because of our findings in Chicago, the Secretary should assure herself that other HUD field offices are making 518(b) payments in accordance with established procedures. Reply: We agree that the pescribed procedures for fully reimbursing homeowners for costs incurred in correcting 518(b) defects were not always followed. This was brought to the attention of the office on the occasions of our program reviews and during the time of our review of appeal cases. We concur that the Chicago Area Office should e directed to pay all future Section 518(b) c!aims in accordance with estab- lished procedures. The homeowners should be fully reimbursed for the amount expended, rather than the amount derived from the cost data book, except where it is documented that an improve- ment was made to the equipment such as the installation of central air conditioning where none existed previously. We agree that all such cases should be reevaluated to asure that the reimbursement was an equitable one. The performance of a reevaluation of all the claims processed to date will require a substantial length of time to complete wth the present staff. 24 APPENDIX I APPENDIX I An examination of the vouchers issued for reimbursement pay- ments will be performed. In any case that the issued voucher is less than the amount actually paid by the homeowner a supple- mental voucher will be issued so that the homeowner will be fully reimbursed. A Notice will be prepared relative to the problem of 518(b) reimbursement and will be distributed to all the field off es. Sincere lU Ass stant Secret y GAO note: Deletion relates to recommendation in the draft report which has been revised in the final report. 25 APPENDIX II APPENDIX II PRINCIPAL HUD OFFICIALS RESPONSIBLE FOR ADMINISTERING ACTIVITIES DISCUSSED IN THIS REPORT Tenure of office From To SECRETARY OF HOUSING AND URBAN DEVELOPMENT: Patricia R. Harris Feb. 1977 Carla A. Hills Present Mar. 1975 Jan. 1977 James T. Lynn Feb. 1973 George W. Romney Feb. 1975 Jan. 1969 Feb. 1973 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER (note a': Lawrrnce B. Simons Mar. 1977 John T. Howley (acting) Present Dec. 1976 Mar. 1977 James L. Yung June 1976 Dec. 1976 ASSISTANT SECRETARY FOR HOUSING PRODUCTION AND MORTGAGE CREDIT- FHA COMMISSIONER (note a): David S. Cook Aug. 1975 June 1976 David M. DeWilde (acting) Nov. 1974 Aug. 1975 Sheldon B. Lubar July 1973 Woodward Kingman (acting) Nov. 1974 Jan. 1973 July 1973 Eugene A. Gulledge Oct. 1969 Jan. 1973 a/On June 14, 1976, HUD combined the functions f ant Secretary for ousing Production and Mortgagethe Assist- FHA Commissioner ad the Assistant Secretary for Credit- Housing Management under a single Office of Assistant Secretary for Housing-Federal Housing Commissiorer. 26
Need for Fairer Treatment of Homeowners' Claims for Defects in Existing Insured Homes
Published by the Government Accountability Office on 1977-07-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)